Signal mistakenly produced 1,000 defective cell phones. The phones cost $60 each to produce. A salvage company will buy the defective phones as they are for $30 each. It would cost Signal $80 per phone to rework the phones. If the phones are reworked, Signal could sell them for $120 each. Signal has excess capacity. Should Signal scrap or rework the phones?
Signal mistakenly produced 1,000 defective cell phones. The phones cost $60 each to produce. A salvage company will buy the defective phones as they are for $30 each. It would cost Signal $80 per phone to rework the phones. If the phones are reworked, Signal could sell them for $120 each. Signal has excess capacity. Should Signal scrap or rework the phones?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Signal mistakenly produced 1,000 defective cell phones. The phones cost $60 each to produce. A salvage
company will buy the defective phones as they are for $30 each. It would cost Signal $80 per phone to
rework the phones. If the phones are reworked, Signal could sell them for $120 each. Signal has excess
capacity. Should Signal scrap or rework the phones?
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